DEFENCE SA has conceded that the major justification to reject South Australian ships from a government pitch was correct, a committee investigating Australian shipbuilding was told yesterday.

And locally-made ships have a reputation for being late and costing almost one and a half times as much as ships from overseas, the committee heard.

The Federal Government announced last month that it would start the purchasing process for two huge supply ships from either South Korea or Spain, triggering an outcry from the local shipbuilders and leading to yesterday’s Senate committee into the future of Australia’s naval shipbuilding industry.

Defence Materiel Organisation chief executive Warren King made the recommendation to government to exclude Australian businesses from the tender process due to a lack of the capability required to build the very large supply ships in Australia and the urgency required to replace the outgoing ships.

Upgrading facilities in Australia for two ships was not feasible, given the country’s shipbuilding strength lies in the smaller-sized surface combatant ships, he said.

“Your total infrastructure environment including all the shedding, paint and blast, cranage (crane capacity), all has to be upgraded to take these much, much larger modules that would exist on the (supply ships),” he said.

“The last thing we’d want in my opinion is to have one or two, one-off, very large ships significantly diverting and diminishing the ability for us to become a world-leading surface combatant (ship) builder.”

When queried whether the $50 million worth of upgrades to the South Australia Techport construction facility needed to handle the large supply ships would have low utilisation, Andrew Fletcher, Chief Executive of Defence SA confirmed the assertion.

“In reality, that comment is correct,” he said.

But Defence Industries Minister Martin Hamilton-Smith was adamant that expanding the Techport facility was a viable option.

“Given the considerable financial investment by the South Australian Government in the Techport facility, the ongoing expansion of Techport to support current and future projects is an enabler to enhancing Australia’s naval shipbuilding facilities to support the Commonwealth’s own Priority Industry Capabilities,” he said.

Mr King also told the committee that to deliver a ship that included 40 per cent Australian-made components costs around 50 per cent more than purchasing an overseas ship.

The committee will report on the supply ship tender process next month, before concluding a broader inquiry into the future of Australia’s shipbuilding industry by July next year.